Small Format Food Retailing Memo - Design Innovation: Supermarket Design Firm Wins Award For Design of Independent 'The Market' Specialty Grocery

Design Services Group (DSG), the supermarket design firm owned by supermarket chain Supervalu, Inc. has won the 2009 Outstanding Merit Award from the Association for Retail Environments (A.R.E.) design association for its design work on the independently-owned small-format specialty and natural foods store "The Market" (pictured above), which is located in Plymouth, Massachusetts USA.

DSG won the prestigious Outstanding Merit award at the just-ended 2009 A.R.E. Retail Design Awards event at GlobalShop, held in Las Vegas.

The award recognizes excellence in retail store design, craftsmanship and innovation. This is the second time DSG has been awarded an A.R.E. Retail Design Award: it won a grocery store category award in 2006 for its design of "Highland Park Market" in Windsor, Conn.

The 13,500 square foot "The Market" is the creation of specialty and natural foods retailing veteran Michael Szathmary, who is the store's managing director, and his associates. Szathmary's 40 year retailing career includes having founded and launched the Nature’s Heartland grocery store and Szathmary’s market/cafes in Needham and Brookline, Massachusetts. [Related post - January 20, 2008: Retail Memo: Designing the 'Perfect' Small-Format Grocery Store in a 'Near-Perfect' Place.]

The store's manager is food retailing veteran Mark Guinasso. Guinasso been in the grocery business for over 30 years, with previous management positions at Purity Supreme, Western Beef Supermarkets, Walter’s Meat Market and Nature’s Heartland, where he worked closely with Michael Szathmary.

The fresh produce department (above), named "Farmers Market," at the small-format "The Market" store keeps with the store's overall design theme of showcasing fresh foods in a rustic setting modeled after a 19th century farmers' market.

This is how the owners and management of "The Market" describe the store's format and retailing approach: "We’re The Market. And we want to change the way you shop — for the better, quicker, healthier and happier. With fresh, locally grown foods in season, expert help and our everyday value pricing on the everyday conventional groceries you need . . . every day.Our name says it all: simple, direct, not too fancy — full of good things waiting to be discovered. In fact, we want to make shopping an experience you actually enjoy.

It begins with healthy, high-quality food: like locally grown, seasonal produce. Freshly baked artisan breads. A delectable deli. Certified Angus beef and naturally raised chicken. And fish right off the boat. Fresh is best.

We also offer a constantly changing array of specialty items created in our own kitchen by our own chef and team — in case you’re too busy or tired to cook. Just heat and serve.

Plus, we have experienced people who know their stuff and are ready to help you. Whether it’s catering a party of fifty or just carrying your bags to your car. We’ve made the aisles more convenient, the displays a little tastier. You can pick up a bouquet by Martin’s Flowers just next to our bakery. And we’ve opened a doorway to Long Ridge Wine & Spirits next door. We’ve even selected great music for you to shop by."

You can learn more about the small-format grocery store at its Web site here.

The Deli department (above) at the independently-owned, small-format "The Market" features scores of deli items and ready-to-heat and ready-to-eat fresh, prepared foods.

DSG's Architecture and Engineering department designed the interior of "The Market" the store, working closely with Elkus Manfredi Architects, a Boston firm that designed the exterior shell.

With only 13,500 square feet to work with, DSG store planners had to carefully account for every bit of available space. They settled on an open layout with relatively low shelves to give shoppers a broad view of the entire store from nearly every vantage point, the design firm says. The small-format store has the look of a country store of decades best with a modernistic twist.

The store's design philosophy, according to DSG, is to showcase fresh foods in a rustic setting modeled after a 19th century farmer's market.

"The Market" looks like a modernistic barn by design. An open floor plan directs customers from one department to the next, from the full-service cheese, deli, meat and seafood departments to the bake shop, seasonal and locally grown produce department, the prepared-food section, salad bar, dairy, frozen foods, chef’s cove and floral department, and then to the aisles of groceries.

The 13,500 square foot store features basically all of the departments a large supermarket offers: dry grocery, fresh produce, meat-seafood, deli-prepared foods, bakery, wine, cheese and the like, each designed to fit into the small-format footprint and limited store interior space.

The store has high arched ceilings which make it appear much larger than its 13,500 square feet.

The small-format store is in the Pinehills development in Plymouth, Massachusetts. "The Market" opened in September, 2008.

As Natural~Specialty Foods Memo (NSFM) first declared in the summer of 2007, there's a small-format food and grocery store mini-revolution happening in the U.S. and in many other parts of the world. This includes chains like Aldi (Europe and U.S.), Lidle (Europe), Supervalu, Inc.'s Sav-A-Lot (U.S.), with there small-format, deep-discount grocery stores; Tesco (globally) with its mid-range small format stores like Tesco Express in Europe and Fresh & Easy in the Western U.S., along with Giant Eagle and its small-format Giant Eagle Express format; Safeway (its The Market format), Supervalue (Urban Fresh by Jewel), Wal-Mart (Marketside) and others in the USA (plus Waitrose and Sainsbury's in the UK) on the more upscale end, and numerous independents focusing on small-format stores, the original small-format grocers. Many other chains are playing in the small-format world as well, in the U.S. and internationally.

The current severe global economic recession has slowed down what in 2007 to mid-2008 was a very robust small-format revolution. But the fact is it has slowed down a ll new store development in the U.S. and globally considerably.

But despite the recession, small-format innovation continues.

And in the case of "The Market" in Plymouth, Massachusetts, it continues on an award winning pace.

[You can view "The Market" store's complete design project from DSG at the link below:
Download Project PDF (7790kb).]

[You can view a slide show of the store's interior here. There are links to photographs and information about other food stores designed by DSG at the site.

[Readers: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Small-Format Food Retailing Memo: Tesco Fresh & Easy CEO 'Delirously Happy' About Chain's Performance to Date

The photograph above of Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is from a profile piece, "Tesco's American dream is still in sight," published in yesterday's The Times (United Kingdom). The Times' caption to the photograph is: 'Not usually a man for taking the back seat, Tim Mason has led Tesco's drive into America and insists that he is 'deliriously happy' with the progress so far.'

Tesco Fresh & Easy Neighborhood Market USA CEO Tim Mason (pictured above) told The Times (United Kingdom) newspaper in a follow-up interview (yesterday) to the November 12 interview published in the paper in which the head of Tesco's Southern California-based small-format convenience grocery and fresh foods chain told the publication the grocer is postponing its launch into the Northern California market, that he's "deliriously happy" with Fresh & Easy's progress and performance to date.

This is the first time we can recall hearing the CEO of a U.S. supermarket chain (U.S or foreign-owned), and a struggling one at that, use such effusive language about the performance of the chain he runs in our nearly 30 years participating in and observing the U.S. food and grocery retailing industry.

The Blog Fresh & Easy Buzz, which covers Tesco's Fresh & Easy Neighborhood Market and the retail food and grocery industry, has a report on the interview with Tim Mason and an analysis of Tesco's Fresh & Easy small-format, convenience-oriented grocery and fresh foods chain.

You can read the story and analysis from Fresh & Easy Buzz at the link below:

Sunday, November 16, 2008: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive'

Fresh & Easy Buzz also has a story today about Sacramento, California's Oak Park Neighborhood Association, a group of residents who live in the city's Oak Park neighborhood and who appealed the design of the Fresh & Easy grocery market Tesco is proposing for that neighborhood to the Sacramento Design Review Board after the board approved the company's standard store design without comment.

Tesco has basically two designs for its Fresh & Easy stores that it uses in all of the markets, and new proposed markets, it is in. The first is the design it puts into vacant buildings, which the majority of the grocer's stores in Southern California, Nevada and Arizona are to date. The second design is its Fresh & Easy built from the ground up prototype design. These are new store construction projects rather than remodels of vacant buildings. The proposed Oak Park Neighborhood Fresh & Easy in Sacramento is a new, built from the ground up store.

With the exception of a few minor exterior graphic and signage differences, Tesco doesn't customize or localize the Fresh & Easy stores. The stores in Southern California, Nevada and Arizona essentially look the same outside and inside. There are some differences with the exteriors of the stores in remodeled vacant buildings based on what those buildings looked like on the outside before the remodeling. Those are accidental exterior differences though, not intentionally designed ones.

Based on the presentation by members of the Oak Park Neighborhood Association at the store design appeal hearing on October 15, 2008, the city's design review board incorporated a number of changes into the conditions of the store's design; changes Tesco must make when it builds the store in Sacramento's Oak park neighborhood.

According to the story in Fresh & Easy Buzz, despite the mandated changes, and the fact the grocer is postponing it launch into Northern California which includes Sacramento, Tesco and the developer have purchased the vacant lot where the proposed Fresh & Easy market is to be built for $1.1 million dollars. In other words it appears the grocery chain is going forward with the store. When construction will start is a whole different question.

The owner of the parcel was Kevin Johnson, the former NBA basketball all-star and native of Sacramento. Johnson retired from the NBA a few years ago and returned home to Sacramento, launching a career as a real estate investor and developer. He also founded a non-profit community-based development organization called HOPE. HOPE is headquartered in Sacramento's Oak Park neighborhood, the historically low-income neighborhood in the city where Kevin Johnson lived throughout his childhood, and where the Tesco Fresh & Easy Neighborhood Market grocery store is set to be built on land Johnson, who is now the mayor-elect of Sacramento, sold to the company for a cool million.

Read the story from Fresh & Easy Buzz at the link below:

Monday, November 17, 2008: Sacramento City Design Board Agrees With Oak Park Group on Design Changes For Proposed Fresh & Easy Store; Escrow Closed on $1.1 Million Parcel

Small-Format Food Retailing Memo: Schenectady, New York-Based Price Chopper Supermarket Chain Creating New Small-Format, Urban-Concept Grocery Store

The Schenectady, New York USA-based Price Chopper supermarket chain is designing a small-format, urban-concept food and grocery store it will use to serve primarily urban neighborhoods in the eastern U.S. and New England markets it operates in, Natural~Specialty Foods Memo has learned.

Neil Golub, the president and CEO of Price Chopper, which is owned by his family's Golub Corporation and is celebrating its 75th anniversary as a family-owned supermarket chain this year, says the supermarket chain's new urban-concept food and grocery store format will be a brand new small-format rather than just a smaller version of its Price Chopper banner supermarkets, which are located New York, Vermont, Connecticut, Pennsylvania, New Hampshire and Massachusetts. [You can read a history of the Price Chopper chain here, along with other information about its 75 years of food and grocery retailing history.]

Privately-held Price Chopper operates 116 supermarkets in the regions listed above. It's 2008 annual sales are estimated at $3.2 billion by the supermarket industry trade publication Supermarket News, which publishes an annual ranking of the the top 75 food and grocery retailers (all formats) in the U.S. Supermarket News ranks Price Chopper as the 38th-largest food and grocery retailer in the U.S. in terms of the grocery chain's 2008 annual gross sales.

The new small-format, urban-concept market will be about 15,000 square feet in size, according to Golub. The format's size is similar to small-format stores created in just the last couple years by Safeway ("The Market"), Wal-Mart (Marketside), Tesco (Fresh & Easy), Supervalu's Jewel Foods (Urban Fresh by Jewel) and others. Those small-format stores run from 10,000 -to- 16,000 square feet.

The urban store will have most of the departments -- produce, meat, grocery, deli/prepared foods, dairy, ect. -- the chain's larger Price Chopper Supermarkets have, Golub says. However, he adds the departments and product selections will be geared to the urban neighborhood consumer base and the size of the stores, making the ultimate look of the store much different than the grocer's standard-size supermarkets.

Golub also said its likely the new, small-format urban-concept grocery market will have a different name, other than Price Chopper, or that if Price Chopper is used in the name it will include and additional word or two in order to differentiate the format and store(s) from the Price Chopper banner supermarkets.

Price Chopper has just started designing the urban-concept format based on a location already chosen for the first store. That store will be in Saratoga Springs, New York, in the city's downtown core.

The Golub family's Price Chopper chain operates an old (built in 1957) 24,000 square foot Price Chopper banner supermarket not far from the new downtown Saratoga Springs location where it will build the first of its small-format urban food and grocery stores, once the company has completed the design.

The lease on the 24,000 square foot supermarket, which is located at 19 Railroad Place in the city, runs out in a little less than three years, according to Golub. The new urban market will open shortly before that lease expires. Price Chopper will then close the 19 Railroad Square supermarket.

Saratoga Springs, New York-based Bonacio Construction bought a 2.8 acre piece of property at Church Streets and Railroad Avenue in downtown Saratoga Springs earlier this month. The new, urban-concept small-format market will be located on that parcel, according to Golub Properties, which is the property arm of the Golub Corporation, which owns Price Chopper.

Sonny Bonacio, the owner of the construction company that's worked with Golub Properties and Price chopper before, will built the new urban, small-format grocery market at the location, which will be completely developed with other retail and perhaps housing as well.

Since Price Chopper is working on creating the new urban market format, and the old Price Chopper supermarket at 19 Railroad Avenue still has nearly three years left on the lease, its likely construction on the retailer's first small-format, urban grocery store at the location won't begin until 2010.

The store will be built at the end of the 2.8 acre downtown Saratoga Springs parcel over part of the parking lot that's now located in the space, Sonny Bonacio says.

Price Chopper's Neil Golub says the chain decided to close the 19 Railroad Place Price Chopper, which was built in 1957, last year. However, the company did not want to give up on serving downtown Saratoga Springs, so it decided to create a completely new urban-concept, small-format store it could built in the new, nearby location, plus use in other urban areas in the markets it does business in, according to Golub.

In fact, earlier this year word got out Price Chopper planned to close the old 19 Railroad place 24,000 square foot supermarket when its lease is up in about three years. A group of downtown Saratoga Springs residents who are customers of the store organized and petitioned Price Chopper not to close the supermarket because they said they would have to travel too far outside the neighborhood to buy groceries if it closed.

One of the urban neighborhood's residents, Caroline Stem, who collected 1,250 signatures on a petition to keep the store open, feared Boacio construction would buy the downtown Saratoga Springs property and then bring in a high-end grocery store that lower- and middle-income neighborhood residents wouldn't be able to afford, she says.

However, Bonacio and representatives from Price Chopper met with local neighborhood residents and explained to them in general the type of urban grocery store they plan on creating and building at the downtown location.

Price Chopper's Golub says the new small-format urban market format will be one that offers basic groceries as well as specialty items. He also says the prices in the small-format urban grocery store will be affordable, just as they are in its Price Chopper supermarkets. In other words, based on what Golub says thus far, it looks like the grocery chain's small-format concept will be a neighborhood-focused, 15,000 square foot store that offers everyday food and grocery products along with specialty items rather than an upscale or gourmet market.

"It (the downtown Saratoga Springs small-format grocery market) will be a grocery store that will serve the basic needs of the community," Golub says. "It's not meant to be something that's going to have things that are priced way up here that people won't want," he adds.

That appears to have pleased Caroline Stem and the other neighborhood residents who want a grocery store that serves all of their needs in the downtown core; a neighborhood food and grocery market.

Earlier this month Bonacio Construction, Price Chopper and the mayor of Saratoga Spring, New York invited the downtown neighborhood residents to an announcement of the new, small-format grocery store in downtown Saratoga Springs. All appeared to be pleased with the development, and what the store will and won't be, we're told by people who attended the announcement at city hall.

Of course our interest goes beyond that first, single store, although we are pleased the neighborhood is getting it. Our thoughts go to the fact Price Chopper is yet another U.S. food and grocery retailing company that's creating a small-format prototype store.

In this case Price Chopper's small-format market will focus on urban neighborhoods.

The small-format food and grocery store revolution in the U.S., and elsewhere in the world, continues on, adding New York-based Price Chopper, which in its 75 years of in business as a family-owned chain has been a major innovator, to those chains that have already joined the trend towards creating format-specific, small-format food and grocery stores.

And of course, independent grocers, America's original small-format, neighborhood-focused food and grocery retailers, continue to be strong in smaller store neighborhood retailing, as well as continuing to innovate in the small-format and neighborhood grocery market realm.

Retail Memo: Supervalu, Inc.-Owned Cub Foods Opening Second Store of its 'Neighborhood-Focused' Supermarket Format in Eagan, Minnesota USA

Neighborhood Food & Grocery Retailing USA

Supervalu, Inc.'s Stillwater, Minnesota USA-based Cub Foods supermarket chain opened its second smaller-format (for the retailer), neighborhood-oriented supermarket in Egan, Minnesota today.

The new 42,000 square foot Cub Foods neighborhood-focused supermarket is located at 1020 Diffley Road in the eastern part of the city. It's the food and grocery retail store anchor of the new Diffley Marketplace center just recently completed in Eagan, Minnesota, which has a population of about 64,000 residents.

Cub Foods, which originally was an independently-owned Minnesota supermarket company, was acquired by Supervalu, Inc. in 1980. There currently are 57 Cub Foods supermarkets operating in Minnesota's Minneapolis-St. Paul Twin Cities region.

At 42,000 square feet, the grocer's new neighborhood-oriented supermarket format, is considerably smaller than the average Cub Foods supermarket, which are 68,000 square feet.

The neighborhood-focused stores are still called Cub Foods. The retailer didn't create a separate name for the stores and it doesn't use "neighborhood market" in the name.

The smaller supermarket that opened today in Eagan, which is the second store of the design and the second supermarket in that particular Twin Cities region city, is specifically designed to be a neighborhood supermarket, according to the retailer. Both of Cub Foods' neighborhood-focused supermarkets are located in Eagan thus far.

The store uses warm colors and incorporates design elements from the local neighborhood into its look in order make the statement the store is the neighborhood residents' neighborhood supermarket, for example.

The neighborhood-oriented design also is more upscale than Cub Foods' standard 68,000 square foot supermarkets, which are full-scale superstores with a discount pricing emphasis.

"Customers will notice an original layout for the fresh produce section, offering an expanded and unique product assortment. The store will also feature a larger selection of frozen food items, a more substantial natural and organic foods section and a full-service floral department," a Cub Foods spokesperson told Natural~Specialty Foods Memo.

"Other amenities include a pharmacy, a large bakery and a full-service TCF Bank," the spokesperson added in describing some additional unique features of the retailer's neighborhood-focused supermarket format and new store, compared to its standard average 68,000 square foot Cub Foods superstores.

Scott Lichtenberg, the store director of the new Eagan East Cub Foods supermarket, tells Natural~Specialty Foods Memo, "The store has a strong focus on the fresh (in-store departments and product selection) side of the business, and our customers will notice many unique offerings. The store was designed and built to maintain the great Cub tradition of low prices and great values," along with being more upscale and neighborhood-oriented.

Although not a "small-format" grocery store (we define small format as between about 10,000 -to 25,000 square feet), the new Cub Foods format without a doubt is a "smaller-format" for the grocer. And at 42,000 square feet compared to 68,000 square feet (the average size of 55 of the chain's 57 supermarkets) it's a significant smaller footprint for the retailer -- 26,000 square feet less worth of significance to be precise.

Even more interesting is the specific focus on creating a "neighborhood" supermarket format, and doing so not only via the store's design but also using the neighborhood framework in choosing the store's departmental and category emphasis.

Small-format and neighborhood market trends

Cub Foods' focus in doing this fits well into two trends we've been writing about and have put a considerable editorial focus on since August, 2007. Those trends are the growing significance of small-format food and grocery stores as well as the trend towards neighborhood-oriented supermarkets.

Small-format stores, 10,000 -to 25,000 square feet, tend by their size and nature to be neighborhood-oriented food and grocery stores. Although that's not always the case, particularly with the hard discount formats like Aldi, Lidl, SuperValu's Sav-A-Lot and others that depending on the country they are located in (Aldi and Lidl are global, Sav-A-Lot is U.S. only) are often positioned to be a bit more regional than just "neighborhood" in terms of the customer base the retailers' want to attract. In other words, there is no rule small-format stores must be neighborhood-focused stores.

Neighborhood-oriented supermarkets however don't have to be small-format by our definition in terms of size. They are nearly always smaller than superstores though, per the Cub Foods comparison to its average store size -- 42,000 square feet compared to 68,000 square feet, for example.

Generally speaking, in the U.S. neighborhood-focused supermarkets (other than small-format) range from about 20,000 square feet to about 45,000 square feet. For example, Wal-Mart Stores, Inc.'s Wal-Mart Neighborhood Market supermarkets are in the 40,000 -to- 45,000 square foot range.

U.S. multi and single-store independent grocers, which are America's original neighborhood food and grocery store retailers and still hold majority distinction in that category in most states, are all over the place in terms of the sizes of their neighborhood supermarkets. The supermarkets range as small as 8,000 -to- 10,000 square feet to as big as 45,000 square feet. A good average seems to be about 15,000 -to 35,000 square feet for U.S. independents operating neighborhood and community-focused supermarkets.

Independent supermarkets need not be neighborhood-focused either. In the U.S. there are numerous multi and single-store upscale and discount format independents that are more regional in nature, for example. Gourmet, specialty and natural foods-focused stores are one example, as are large independent discount superstores as well as ethnic food markets.

A possible small-format future for Cub Foods?

Being a regional chain, we think its smart for Cub Foods to have created this neighborhood-focused, smaller -format banner or format because it allows the grocer to go into more locations in its market region, the Minneapolis-St. Paul region. With 55 of the average 68,000 square foot superstores in the market, finding more niche locations is key for such a food and grocery retailer.

We would suggest Cub look at adding "neighborhood supermarket" to the stores' title though. Perhaps: "Cub Neighborhood Supermarket." would be good, allowing the format to be differentiated from the discount store. along with using the name to reinforce the "neighborhood-focus" of the format and stores.

Urban Fresh by Cub

Additionally, since Cub Foods is owned by Supervalu, Inc., which is experimenting with its own small-format banner, "Urban Fresh by Jewel," at its Illinois-based Jewel supermarket chain, which operates supermarkets throughout Illinois and Indiana, it might be a good idea for the company to use this expertise to experiment with a small-format store with its Cub Foods chain. [Read this September 18, 2008 piece from Natural~Specialty Foods Memo for more information on "Urban Fresh by Jewel": Small-Format Food Retailing Memo: First 'Urban Fresh by Jewel' Small-Format Food and Grocery Market Opens Today in Chicago's Lincoln Park Neighborhood.]

Cub Foods' market area, Minneapolis-St. Paul Twin Cities, is an urban region anchored by two big cities, the Twin cities mentioned above. Both cities have vibrant urban cores, like Chicago where the first 15,000 square foot "Urban Fresh by Jewel" opened earlier this year.

Minneapolis-St Paul also also have other similarities to Chicago: All three are big Midwestern cities with a similar consumer culture, for example. Downtown Minneapolis and St. Paul, like downtown Chicago, also have a lack of food stores in the downtown core, as well as in a number of urban neighborhoods. These are all good criteria for a small-format store.

Cub Foods could even name the small-format store "Urban Fresh by Cub Foods." We would locate the first "Urban Fresh by Cub Foods" test store in downtown Minneapolis, which is a vibrant downtown in a vibrant city, has lots of upscale workers and residents, and increasingly is seeing more and residents moving downtown into new condominium projects. Since "Cub" means little (like a bear cub) a small-format store is a natural for the chain.

We even think Supervalu could adopt the basic "Urban Fresh by Jewel" format, which is an upscale format which features lots of fresh, prepared foods, specialty, natural and organic products, fresh produce and meat departments, wines and craft beers -- but also offers a good selection of basic food and grocery items at decent prices -- customizing and localizing the format a bit in design and merchandising for downtown Minneapolis. Localizing is always key.

It's food for thought.

After all, as we've been writing about since August, 2007, there's a small-format food and grocery retailing revolution going on both in the United States and globally. That size and format trend is ties to the neighborhood food retailing trend in the U.S.

It's our analysis the small-format and neighborhood-oriented food retailing "revolutions" will only gain steam because the current global financial crisis and recession are slowly forcing people to think smaller -- smaller homes, smaller cars, smaller bank accounts, smaller budgets and the like. This change to a smaller and more frugal lifestyle will result we believe in a growing popularity among consumers to shop at smaller grocery stores, assuming the pricing is as or near as good as it is larger stores and the product selection is of a limited assortment but still decent.

The majority of U.S. consumers will still shop at big stores like Wal-Mart Supercenters Costco and supermarket company superstores. But we think they will shift a significant portion of their spending to neighborhood-oriented markets because of the convenience, savings on gasoline and a desire for a more simple, easier shopping experience.

This is already happening with Aldi and Supervalu's Sav-A-Lot stores in the U.S., as well as in the case Trader Joe's specialty markets, which draw shoppers from as much as 40-50 miles away in many cases. Numerous competitive neighborhood-oriented supermarkets also have been reporting increased sales this year, particularly when gasoline was at an over $4 a gallon. It is about 40% less than that right now. But it will go back up.

Further, in the U.S. there is a trend towards people moving from the suburbs to big cities in many parts of the country. This trend and the resulting increased population in these cities -- Los Angeles, San Francisco, Chicago, Seattle, Minneapolis to name just five -- is and will create more demand for stores located in the urban centers that offer a good selection of both basic groceries and more upscale product selections, including specialty, natural, organic and premium, prepared foods.

Cub Foods also is doing a neighborhood-oriented thing with the opening of its second neighborhood-focused supermarket in the Twin Cities region city of Egan. The retailer is donate a half-ton (1,000 pounds) of non-perishable food items to Second Harvest Heartland Food Bank that serves residents of Eagan, Minnesota.

Small-Format Food Retailing Memo: Hard Times at Tesco's Fresh & Easy; Will Two Proposed Changes Help? Meanwhile the Grocer Opens its 100th Store

Tesco's small-format Fresh & Easy Neighborhood Market USA grocery and fresh foods chain is postponing its plans to begin opening stores in Northern California in early 2009.

Read a report and analysis from the Fresh & Easy Buzz Blog on the development at the link below:

>Fresh & Easy Buzz, Wednesday, November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

Additionally, Fresh & Easy Buzz reports Tesco's Fresh & Easy is considering making two major changes -- flip flopping the grocery shelving in all of its stores and redesigning the packaging of its fresh & easy private label packaged goods products -- as a way to increase both store sales and sales of its store brand products in the various grocery products categories.

Read the story from Fresh & Easy Buzz at the link below:

Fresh & Easy Buzz, Wedneday, November 12, 2008: Breaking News: Tesco's Fresh & Easy Considering Two Major Changes, One Physical the Other Design Oriented, to Increase Sales in its 100 Stores

Lastly, Fresh & Easy Buzz has a piece from yesterday about Tesco opening its 100th small-format, convenience-oriented Fresh & Easy market in the Southern California city of Fullerton. It's been about one year since the first Fresh & Easy store officially opened in Hemet, in Southern California.

In its story yesterday, Fresh & Easy Buzz suggested Tesco might postpone the opening of its planned Northern California stores, along with opening the stores later in the year than it has previously said it would.

Read the piece from Fresh & Easy Buzz at the link below:

>Fresh & Easy Buzz, Tuesday, November 11, 2008: Southern California Market Report: Tesco Hits A Numerical Milestone Tomorrow Morning As Store Number 100 Opens its Doors in Fullerton, California

Speaking of it being nearly one year since the first Fresh & Easy Neighborhood Market store opened, that first Fresh & Easy store in Hemet, California was actually scheduled to open on November 8, 2007 its official opening day. However, as Natural~Specialty Foods Memo was one of the first publications to report, Tesco actually opened the store a week earlier in a stealth, soft opening to test the first of its small-format markets out prior to its official grand opening. on November 8, 2007.

You can read our piece about that stealth opening at the link below:

>Natural~Specialty Foods Memo, November 2, 2007: Breaking News: First Fresh & Easy Market Opens A Week Early: The Fresh & Easy Neighborhood Market in Hemet, California is open for business a week before it's official grand opening date of November 8.

Small-Format Food Retailing Memo: Wal-Mart Studying Second Small-Format Grocery Store Concept; Inside Marketside One Week Before the First Stores Open

The Blog Fresh & Easy Buzz, which covers and writes about Tesco's Fresh & Easy Neighborhood Market, small-format food and grocery retailing, and related topics and issues, has two stories today about Wal-Mart, Inc. and small-format food retailing.

The first piece reports on and details comments Wal-Mart, Inc. CEO Lee Scott made earlier this month at the 15th Annual Goldman Sachs Global Retailing Conference in New York City about a second (besides its small-format Marketside) small-format grocery store concept the retailer is studying.

You can read that story at the link here: "Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store."

The second piece from Fresh & Easy Buzz provides new information about Wal-Mart's Marketside grocery and fresh foods stores -- the first four of which will open on October 4 in Chandler, Gilbert, Mesa and Tempe, Arizona, in the Phoenix, Arizona Metropolitan market region -- offering a look inside Marketside prior to the stores opening in a week.

You can read that story here: "Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona."

The four Marketside stores (which we coined as "Small-Marts" in August, 2007) which are about 15,000 -to- 20,000 square feet will open in just one week.

The combination grocery, fresh and specialty foods stores -- which will feature basic groceries, natural, organic and specialty products, fresh baked goods, fresh produce and meats, craft beers, wines and spirits, and in-store prepared foods -- will herald a new era for Wal-Mart, one in which the world's largest retailer joins the prepared and natural/specialty foods categories in a major way.

The Marketside development also places Wal-Mart square in the center of the small-format food and grocery retailing revolution we've been talking about in Natural~Specialty Foods Memo since we first published the Blog in August, 2007, over a year ago.

The small-format food and grocery retailing revolution -- and small-format competition -- has just started. Stay tuned.

Small-Format Food Retailing Memo: Wal-Mart to Open Small-Format, 'Small-Mart' Marketside Stores in Arizona on October 4

From the Natural~Specialty Foods Memo Editor's Desk: Wal-Mart will open its four small-format grceory and fresh foods Marketside stores in Chandler, Gilbert Mesa and Tempe, Arizona in the Phoenix Metropolitan market on October 4, according to its marketside.com website and a report in the blog Fresh & Easy Buzz.

As our readers know, we've covered Wal-Mart's Marketside format ('Small-Mart's being a term we coined for the stores) development extensively, beginning in September of 2007.

The Arizona stores are the first for Marketside units for Wal-Mart. Wal-Mart thus far plans to open two Marketside stores in Southern California, one in San Diego and another in the nearby city of Oceanside, according to our sources. Wal-Mart has not publicly announced the two California locations.

Additionally, we've reported Wal-Mart has plans to open more Marketside stores in Arizona -- besides the first four opening in 11 days -- as well as doing the same in Southern California, along with opening some of the small-format grocery and fresh foods markets in Northern California, particularly in the San Francisco Bay Area. Also, Wal-Mart has looked at opening a Marketside store in the Reno area, in Northern Nevada.


Below is the report from Fresh & Easy Buzz. Natural~Specialty Foods Memo is working on an analysis piece regarding the Marketside stores opening on October 4. We hope to have it published soon.

From Fresh & Easy Buzz: Wednesday, September 24, 2008

Breaking News: Wal-Mart to Open its Four Marketside Food and Grocery Markets in the Phoeniz, AZ Metropolitan Region on October 4

As we've been reporting on Fresh & Easy Buzz for months, Wal-Mart, Inc. has planned an early Fall, 2008 opening of its small-format, combination grocery and in-store fresh, prepared foods Marketside stores in the Phoenix, Arizona Metropolitan region.

Wal-Mart has now announced and confirmed on its http://www.marketside.com/ website the specific date the four Marketside grocery markets will open in the Phoenix Metropolitan region cities of Gilbert, Mesa, Chandler and Tempe.

All four Marketside stores are set to Open on Saturday, October 4, just 11 days from today, according to the announcement on the Marketside website. [Click here to see the announcement (look in the right corner) on the website. Click here for maps showing the location of each store in the four Arizona cities.

Click here to read the rest of the story from Fresh & Easy Buzz.

[Editor's Note -- the photos: The photograph at the top is of the Wal-Mart Marketside store in Mesa, Arizona. The picture was taken in late August, 2008. The second photograph shows what the inside of a Marketside store looks like (at least a small portion of it). Additionally, the aprons the three clerks in the picture are wearing are the Marketside store employee uniforms. The photo is from the Marketside.com website.]

Small-Format Food Retailing Memo: Two Dozen Florida USA Shoppers Who've Been Waiting Two Years For An Aldi Store to Open Get Their Day On Thursday

For the two dozen shoppers who've been waiting for two years -- and regularly calling a newspaper reporter for update on the estimated date of arrival -- for small-format, no frills deep discount grocery chain Aldi USA to open its first store in the Tampa Bay region in Florida, the wait ends on Thursday.

Aldi, which operates about 850 stores throughout the Midwest, Mid-Atlantic region and parts of the eastern USA, opens its first store in Florida, in Clearwater, this Thursday. An additional eight Aldi markets also will open on the same dayin the region.

The timing seems right in the minds of a number of the area's shoppers, according to a piece in today's St. Petersburg Times newspaper.

The writer of the story, St. Petersburg Times' staff writer Mark Albright, says a Florida consumer named Johana Szokie "is one of two dozen ardent Aldi fans who have called me for two years to learn when their favorite little grocer finally makes landfall in the Tampa Bay area" in Florida, of which Clearwater is a part.

Those are two dozen very dedicated shoppers. The type any grocery chain would be proud to have.

And in the case of Ms. Szokie, she doesn't even live in Clearwater. However, she tells reporter Mark Albright she will be driving to the Aldi store when it opens in the city on Thursday morning.

Aldi USA, which is the Illinois-based U.S. division of German small-format deep discount grocery chain Aldi International, has big plans in Florida, which is one of the top five food and grocery sales markets in the U.S.

The company expects to open from 25 -to- 50 of the no frills, little deep discount markets in Florida by 2010, with many more coming after that.

Aldi also has built a distribution center in Florida to serve its stores in the region. A grocery chain doesn't do that unless it has big (or big-little in the case of Aldi stores) development plans in terms of having a high store count in a given market.

The St. Petersburg Times story offers a nice local angle on the Aldi stores set to open in parts of Florida on Thursday.

In addition to the excited shoppers, Florida's major supermarket chain's like Publix and Winn-Dixie are watching Aldi closely on their respective home turf.

In fact, you can bet both chains, along with nearly every other supermarket chain in the state, will have "undercover representatives" attending Thursday's Aldi store grand openings, along with those dozen excited shoppers and many others.

Read the St. Petersburg Times' story, "Wait's nearly over for Aldi fans," here

Resources:

To read past stories about Aldi in Natural~Specialty Foods Memo just click the links below:

>Aldi

>Aldi USA

>Aldi International

Small-Format Food Retailing Memo: This Independent Combines C-Store Convenience With Fresh Foods, Groceries and A Secret Weapon -- Lots of Beer

Small-Format Food Retailing Special Report

Another independent, entrepreneurial retailer has decided the small-format hybrid convenience-grocery format might just be the future of food and grocery retailing. And like all good independents, Navid Tony Hoomanrad, who recently opened his Hyde Park Market neighborhood-oriented grocery and convenience-style store at 4429 Duval Street in Austin, Texas has added his own niche element to the format.

Hyde Park Market features a combination of traditional convenience store items, along with fresh produce (including organics), upscale Boars Head brand deli items, a refrigerated case devoted to quality ready-to-eat prepared foods items like Green Cart brand sandwiches, a selection of basic, specialty and organic grocery products, non-foods including a selection of hardware items, and Tony Hoomanrad's secret merchandising weapon -- beer -- and lots of it.

The independent grocer's strategy for his Hyde Park Market was to create a neighborhood store that was neither a traditional convenience store or a typical neighborhood grocery store. His goal: Offer in a small-format what he calls a "one-stop shop for fresh foods and grocery products that rivals anything found in a much larger supermarket. On a limited assortment scale of course.

He also believed offering an incredible variety of beer brands and styles could serve as a unique point of differentiation for his store, along with giving it a reputation for offering something special from day one. It also helps that Austin is a major beer drinking town.

Grocer Hoomanrad says he met with each of his eight beer distributors, ultimately deciding to order every domestic and imported beer brand, variety and packaging option -- single beers, 6-packs, barrels, you name it -- each one of them offered.

The result: currently Hyde Park Market is offering 525 different types of beer -- from Budweiser and Miller to craft beers and imports. In fact, although the store has only been open for a short time, it's believed to offer the second-most varieties of beer for sale than any other store, of any other size, in the city of Austin.

And remember, Austin just happens to be home to two of the biggest and best upscale food retailers (headquartered in Texas), both major beer category players, in the United States: Whole Foods Market, Inc. and upscale HEB Central Market.

No minor beer sellers these two retailers are, especially at their respective flagship stores in Austin. According to a local beer distributor who's in a position to know, Whole Foods' top beer selling store in Austin has about 450 varieties of beer, while Central Market clocks-in at about 360 or so.

The distributor says the only-recently opened Hyde Park Market isn't the number on beer variety retailer in Austin...yet. But it's close. That honor goes to a specialty beverage retailer named Specs, which offers about 550 varieties of beer, he says.

But grocer Hoomanrad is only 25 varieties behind Specs, which has been around for much longer, for the honor of the retailer offering the most varieties of beer in beer-drinking Austin, Texas.

And since the beer distributor says Tony Hoomanrad asks his beer sales reps each time they're in the store if they've got in anything new that his store isn't carrying -- and usually orders whatever beer it is if they do -- we wouldn't be surprised if Hyde Park Market, one of the latest entrants into small-format hybrid grocery and convenience store retailing, very soon becomes the number one beer variety seller in all of Austin -- along with offering lots of fresh foods, groceries (including specialty and natural) and other grocery store products, along with a mix of traditional c-store items (including a fueling station outside), all blended into a hybrid formula in a small-format store.

Small-Format Food Retailing Memo: Savannah, Georgia USA's Parker's Convenience Stores: Taking Hybrid Convenience-Grocery Retailing to Upscale Heights

Small-Format Food Retailing Special Report

From the Natural~Specialty Foods Memo Editor's Desk: On September 13, we wrote this piece, " Small-Format Food Retailing Memo: The 'Eco-Convenience' Hybrid Store Trend Continues to Emerge: 'Locali Conscious Convenience' to Open First Store," about what we've identified as an emerging trend in the convenience-oriented food and grocery retailing industry -- a retail format we call the eco-convenience or Econvenience store.

This format combines some of the traditional elements of convenience store retailing like limited assortments of basic grocery items, fueling stations and foodservice but takes things in a "green" direction, including taking on the format and merchandising elements of a mini natural foods store.

The eco-convenience format also features far more food and grocery products in general, especially healthy, natural and organic items, than the traditional convenience store does. It also doesn't generally offer tobacco products for sale, which are key sales generators in traditional convenience stores. Further, rather than selling basic beer and wine brands, the eco-convenience stores tend to go more upscale and specialty, offer some conventional products but putting an emphasis on craft beers and specialty wines.

The upscale hybrid convenience-grocery store

Long before the emergence of the eco-convenience store trend however -- as well as long before the emergence of hybrid small-format food and grocery stores like Tesco's Fresh & Easy Neighborhood Market, Giant Eagle Express, Safeway Stores' "The Market" format and Wal-Mart's Marketside, the first stores of which are set to open in a few weeks in four cities in the Phoenix, Arizona Metropolitan region -- their was, and continues to be, what we call the upscale hybrid convenience-grocery store.

This format is best typified by Pennsylvania-based Wawa, Inc., which operates about 400 upscale hybrid convenience-grocery stores in the eastern Unites States. Wawa stores offer fueling stations and tobacco products like traditional convenience stores do, along with offering a limited assortment of basic grocery items (Wawa's limited assortment is more extensive than the average C-store).

However, the retailer also sells fresh produce in its stores, including some organic produce, offers a limited selection of natural, organic and specialty food and grocery products, and puts a major emphasis on quality fresh, prepared foods (foodservice) rather than the typical "belly filler" fair the traditional convenience store sells. Premium coffees, quality fresh baked goods and other premium and specialty offerings are a part of the Wawa stores' merchandising mix.

Wawa also does all this in what is a far more upscale designed retail store than that of the traditional convenience store.

Wawa is a pioneer in this niche, having converted its stores to this more upscale hybrid convenience-grocery store format in the 1980's. It's continued to refine the approach, and in the case of many of its newest stores it's going even more upscale in design, look and merchandising.

Parkers Convenience Stores

Wawa isn't alone in pioneering this format. Another pioneer in upscale hybrid convenience-grocery store retailing is Savannah, Georgia-based Parker's Convenience Stores, which we've written about before in Natural~Specialty Foods Memo.

Parker's primary hybrid convenience-grocery store banner is Parker's Convenience Stores (interior pictured above), an upscale version of the traditional convenience store with elements of a specialty foods store tossed in the mix. Quality foodservice is a major emphasis in the stores.

Parker's takes an even more upscale specialty-gourmet retailing approach in one of its banners, Parker's Market Urban Gourmet store (pictured above), which if you've been to or seen interior pictures of Safeway's "the market by Vons" in Long Beach, California, looks similar in many ways.

Parker's opened its first Parker's Gourmet Market convenience-oriented grocery-convenience market in Savannah, Georgia long before Safeway created its "The Market" format. The first and currently only small-format Safeway-owned "The Market" format store opened in Long Beach in May of this year.

Today's edition of Convenience Store News has a well detailed and written piece about Parker's Convenience Stores. The article, written by Barbara Grondin Francella, discusses Parker's format philosophy, operations and future plans, among other things. The story fits into our current "Small-Format Food Retailing Special Report" theme. Therefore we are reprinting the piece about Parker's from today's Convenience Store News for our readers. Read it below:

Twice as Nice
By Barbara Grondin Francella
Convenience Store News
September 15, 2008

Greg Parker's philosophy about convenience marketing took root during his first retailing experience in 1975, when at age 21 he built a c-store in Midway, Ga. -- and installed expensive paneling on the walls and pricey carpet on the floors.

Customers, he said, would walk in and gasp, "Wow! What is this?"

"I knew nothing about retailing back then, but I knew people like to feel special," Parker related. "That has been the differentiating aspect of our company culture. In everything we do, we try to elevate the customer experience."

The flavor of that c-store with auto service bay, which Parker built as an offshoot of his father's small Amoco Oil distributorship, can be found in the upscale, foodservice-driven Parker's Convenience Stores today. Back then, the young entrepreneur equipped the store with a kitchen, where then-teenager Amy Lane, who is now Parker's chief operating officer, made hamburgers and fries, hot dogs, salads, sandwiches and full, made-to-order breakfasts.

"I didn't think it was so novel at the time," Parker recalled. "I just thought I'd need to create alternate profit centers."

After opening that first store in 1975, Parker didn't take a day off, including Christmas, for three and a half years. "I didn't have time to go see what others in the industry were doing. Now, if I hear of something great happening, I don't hesitate to hop on a plane and go visit."

Still, Parker knew instinctively that developing an outstanding experience for the customer was crucial. "When I was opening my fifth store, my brother said, 'You may be making this too nice for this town.' But I thought, 'You can never go wrong delivering more than people expect.'"

That strategy has worked very well for 33 years. Savannah, Ga.-based Parker Companies' 25 Parker's Convenience Stores; Parker's Market gourmet store; Parker Oil Co., a distributor of BP, Chevron and Parker's own Supron brand gasoline; three Spin City Laundromats; an Urban Attic self-storage facility and a real estate business, tallied more than $150 million in sales last year.

Parker's Convenience Stores, a mix of urban, suburban and rural sites each unique in look, offer standard convenience items and a not-so-standard menu of homemade Parker's Market-branded sweets, sandwiches and salads, some made in the store, others at a commissary store and delivered each day. Gourmet coffee, milk shakes, walk-in beer coolers, 79-cent Quench Zone fountain drinks with chewy ice and "the cheapest cigarette carton prices in town" are presented in an upscale environment."

We rationalize our portfolio of stores and spend when we think we need to," said Parker, who noted the company is very good about keeping its stores up to date.

"It's very important to reinvest in your best performers," he added. "You don't want to be just a harvester. There is a time to sow and a time to reap, and you need to be thoughtful when you are doing both. I have an intense desire to sharpen the saw."

Despite the tough economy, Parker has three new locations slated to open this year in Savannah and Blitchton, Ga., and Bluffton, S.C.

Parker appears to be one of the many c-store retailers looking to take advantage of business incentives included with the taxpayer rebates in the government's Economic Stimulus Act of 2008. A recent CSNews.com online poll found that 14 percent of retailers were already benefiting from the incentives and 36 percent were trying to find a way to take advantage of the incentives. Interestingly, despite a lot of publicity, 43 percent of retailers said they were not even aware of the business incentives in the rebate program.

"The Bush 'stimulus package' -- and I try not to laugh when I say that -- gives us a 50-percent bonus depreciation," Parker noted. Assets that would typically depreciate over five years, at 20 percent per year, may now, for example, be depreciated at a rate of 50 percent in the first year, with the other 50 percent spread evenly over the five years, giving retailers a 60-percent depreciation rate in the first year.

"If you build something now, you'll pay little if any taxes on it the first year. Because your tax estimates are based on the previous year," he noted. "The next year, your required tax estimates will also be lower. Plus, if you have a strong balance sheet, money is cheap now. Building costs are coming down, land costs are coming down and unemployment is up, so labor costs are coming down. It is a great time to build."

New Parker's Convenience Stores measure 4,400 square feet. Upscale in appearance, they feature tiled floors and walls, have an extensive foodservice lineup, "and outrageously nice restrooms," Parker said. Outside, eight multi-product dispensers offer Supron motor fuels.

"Our brand starts with the architecture, which I believe is our greatest art form," Parker explained. "We outspend our competition when it comes to building our stores in terms of materials, design, lighting and landscaping. We spend between $2 million and $2.5 million per location, not including the land cost."

Parker also typically outspends other retailers outside the store. Parker's Convenience Stores have won a number of landscaping awards, unusual in the convenience business. Parker, who studied botany in college, personally selects a new site's planting materials, sometimes opting for three times as much as called for by the landscape designer.

He recently prevailed in a very public, heated exchange with a local planning commission, which wanted him to remove a 300-year-old tree on a piece of property that will hold a new store soon. The community backed him in his efforts to save the tree.

Lush landscaping aside, each convenience store looks different, although Parker is giving them a few common elements now, with a specific look for all the urban stores, the suburban stores and the rural locations. For instance, all rural stores will have low-country architecture, wood siding and metal latticework over the entrance.

If Parker sees something he likes, he'll incorporate it into a store. One unit, for example, features cutouts of people hanging at angles from the ceiling rafters. They are the work of an actor/student, who was learning set design at the Savannah College of Art Design while working part time at one of the stores. One figure holds a hot dog; another is shooting ketchup across the room to go on the wiener.

Parker recently completed a $500,000 upgrade of Parker's Market. (For more on Parker's Market, see "Parker's Market: Convenience Meets Gourmet," at www.csnews.com.)"

Before this, my wife and I did all the design work in that store," he said. "But we went to the opening of a new restaurant and loved the design and hired the designer [Joel Snayd, of Re:think Design Studio] that night. We do most ourselves, but solicit many opinions."

The new design opened up the floor plan by relocating a gourmet coffee center, which had split the store in two, and added a crowd-pleasing mix of materials and elements, including granite countertops, custom lighting fixtures, blackboards for signage and a wine display area using reclaimed wood and old iron piping.

"I can't build anything cost effective," Parker laughed. "I always overspend. I love being creative and artistic, and I'm as passionate about architecture as I am about c-stores. Everything we do, I want people to think, 'Wow.'"

Many Happy Returns

Whether he's overspending or not, Parker is getting a return on that investment. Parker's Convenience Stores rank consistently in the top quartile of all industry performance measures, and Parker's Market rings up millions in sales each year.

The retailer credits these results to a disciplined approach to controlling expenses and a keen focus on gross profit dollars.

"We have the lowest cents-per-gallon break-even point of anyone I know in the industry," he said. "We really pay attention to the details, and we train our people before they step into the store so we don't suffer as many mistakes. It helps to reduce turnover too."

The company pays higher-than-industry-average salaries, offering bonuses for catching honest mistakes ($10); catching and prosecuting shoplifters ($50); turning in a co-worker for stealing ($500); and recruiting another employee who stays one year ($500). Managers' bonuses equal up to 21 percent of their quarterly salaries. Additionally, a six-month bonus of $1 per hour worked is offered as an incentive to keep new employees.

Parker's benefit package includes health and dental insurance and a medical pre-tax spending plan, life insurance, 401K, paid vacation and a YMCA membership.

Parker relies on state-of-the-art retail technology, including Dresser Wayne's InSite and PDI's Enterprise, Focal Point, Applicant and Virtual University software, to keep firm tabs on inventory, each SKU's profitability and human resource functions. Products are scanned into inventory and at sale; Parker's team makes assortment and space allocations based on that data. "We analyze our baskets," he said. "We understand there are five traffic-generating areas of the store -- checkout, fountain and frozen carbonated beverages, cold vault, beer caves and coffee counter -- and we focus on having the right products in the path of the consumer to increase the opportunity for adjacency sales."

Brandon Hofmann, our marketing manager, is the best in the industry, and he has us focused on gross margin dollar contribution," said Parker.

He also said he is "constantly preaching" about gross dollar margin (GDM) contribution. "We can see what the top GDM contributors are by item and understand the importance of space-to-sales ratios for planograms," he noted. "But the real issue is space-to-GDM contribution."

For example, he regularly uses GDM contribution to rationalize products in the cooler. "We ask ourselves where high-dollar margin products are in the cooler door. Are they at eye level? In door 1? Door 2?"

You'll never find the words "loss leader" in any of Parker's marketing plans. "Why would anyone want to lose money on something? We position ourselves as a low-cost provider in fountain drinks, but it's still about growing the category and having the most pennies in the bottom line. We have the lowest cost on cigarette cartons. Our pack prices are not the lowest, but our three-pack special is."

Outside the box, all new stores sell Parker's Supron brand gasoline. If a c-store operator goes to market with beautiful stores at superior locations, customers don't care if he is selling a major gasoline brand, he said. "When you look at the top performers in the country, including Wawa, Sheetz, QuikTrip and others, very few are selling branded gasoline."

In 2001, when he created Supron, Parker wanted it to feel "like a major brand." Customers' initially reacted to it with curiosity. "We did radio and TV, billboard and bus advertising, and the consumer got familiar with the brand," Parker said.

Small-Format Food Retailing Memo: 'How Sweet it is': New York City's Economy Candy; A Small-Format Urban Store With A Single Focus

Small-Format Food Retailing Special Report

It's a small-format store that's been around for 71 years. And it has a single category focus: candy.

From the most premium chocolate bars and natural and organic confections, to everyday candy bars, exotic brands and much more, Economy Candy on New York City's Lower East side not only is a veritable one-stop shop for everything candy, it's also a category killer of sorts, selling its huge selection of sweet treats at discount prices, hence the store's name.

The family-owned and run, narrow but long store with high ceilings--which also sells scores of varieties of nuts and dried fruits along with its candy massive selection--was founded in 1937 by current owner Jerry Cohen's father.

When the senior Cohen opened Economy Candy in 1937 it was the typical old-fashion candy shop of the era, consisting mostly of bulk bins full of every imaginable variety of candy, from jawbreakers to chocolates, along with selling boxed chocolates for the gift market.

Today the younger Cohen, Jerry, who runs the store along with his wife Ilene, son Mitchell and a few dedicated employees, operates what New Yorkers call the "Noshers Paradise of the Lower East Side."

Economy Candy, which is located at 108 Rivington Street in the Big Apple, is packed with every imaginable variety of candy. The Cohen's follow the old retailing strategy of stacking product high and selling it cheap, filling the store's long, narrow aisles with stacks of discount-priced confections, including ethnic candy items that appeal to Jews, Hispanics and others.

The family-owned store, which has loyal customers from multiple-generations, also sells a variety of specialty and natural foods items, including teas, coffees and other products a a sideline. Jerry Cohen (no relation to the Ben & Jerry's founder of the same name) understands complementary merchandising well.

What makes Economy Candy so popular and what has maintained an astounding level of customer loyalty is that adapting to today's market and customer hasn't meant abandoning its essential quality as a neighborhood candy store, Cohen says.

Commenting on his philosophy of constantly bringing in new items, Jerry Cohen says: "You need to have whatever it takes to get people in. Teas, sugar-free and low-calorie candies, gift baskets and hand-dipped chocolates are among the products that filtered in as the inventory has changed to reflect the changing urban landscape of today," he says about his philosophy and the store.

Economy Candy also keeps to its origins. Along with offering hundreds of varieties (maybe thousands) of packaged candies, the store merchandes scores of candy items in bulk, along with offering numerous varieties of dried nuts and fruits in bulk bins.

These items range from the basic nut varieties like almonds, walnuts and cashews, to more specialty varieties like Hazelnuts, all sold at value prices. The store also offers a variety of its own special nut blends, creating various combinations and selling them in bulk.

The same is the case with dried fruits. Among the varieties offered include: dried apples, blueberries, strawberries, cranberrys, tart cherries, dried cantaloupe and many others.

But it is candy that's at the heart--literally and merchandising-wise--of Economy Candy. upscale, downscale, premium, conventional, natural, organic (and candy brands that can't be found elsewhere) are shelved and stacked throughout the store. It's a shrine to the ingredient sugar. And speaking of sugar, walking through the store one can't help smelling that sweet scent no matter what part of Economy Candy you are in.

Service also is at the heart of Economy Candy. Knowing customers by name, letting them nosh on the sweet treats in the bulk bins as long as they don't make a meal out of it, and seeking out rare brands and varieties of candy for customers are all a part of the family-style customer service the Cohen family practices at their 71-year old small-format, value-priced candy store on the Lower East Side.

Economy Candy is an excellent example of how a small store with a single-minded focus, combining reasonable prices with category expertise and superior customer service, can not only survive but thrive, even in the biggest city in the United States.

Lessons from the store's merchandising and operations, category expertise, affordable pricing, superior customer service, and more, are valuable to food and grocery retailers of any size and format. We also think there's room in the retail space for more small-format, single-focus (with some complementary categories of course) stores.

And such single-focus, category killer stores don't have to be huge warehouse stores. Rather, like Economy Candy, they can be smaller footprint stores, as long as the format and execution at retail are done in a superior way.

Economy Candy is a sweet case study in doing it all well from a merchandising, operational and customer service perspective.

Retail Memo: 'Business Week' Discovers Sunflower Farmers Market, Just As Many Shoppers Are Doing Daily

From the Natural~Specialty Foods Memo Editor's Desk: As regular readers of Natural~Specialty Foods Memo (NSFM) are aware, we write often about fast-growing natural foods retail chain Sunflower Farmers Market, calling it one of the smaller-format, "fighting tiger" (the big tiger being Whole Foods Market, Inc.) natural grocers along with Sprouts Farmers Market. [Just type in Sunflower Farmers Market in the search box at the top of the blog and you can get a selection of those stories and posts.]

We first started writing about Sunflower Farmers Market, which was founded by former Wild Oats Market, Inc. founder Mike Gilliland (pictured above in a store produce department) who is the company's CEO or 'Head Sunflower,' last year (when NSFM was started) at a time when most publications devoted very little if any ink to the natural foods' grocer.

We've continued to regularly report on the retailer's developments and write about what we often call the natural foods retail space category-killer because of its discount prices on natural and organic products, especially fresh produce and shelf-stable food grocery items.

With the $30 million Sunflower Farmers Market raised early this year, it's embarked upon a fast-growth new store strategy, as we've written about. This growth strategy even includes opening stores in Whole Foods Market's home territory of Texas.

We often suggest that Sunflower and Sprouts Farmers Market combined offer much more of a competitive challenge today to Whole Foods Market, Inc. than Wild Oats did pre-acquisition. Of course, Sunflower and Sprouts don't have as many stores as Wild Oats had before merging with Whole Foods Market last year. (There were 110 Wild Oats-owned stores when Whole Foods acquired the chain last year.) However, both "fighting tiger" natural foods retailers are growing so fast it won't be too long until they reach that number between them.

Sunflower Farmers Market has started getting attention from both the mainstream supermarket industry trade press and the consumer business press in the last couple months. This is for two primary reasons: The natural grocer's raising of the $30 million in investment money earlier this year and its resulting rapid new store opening program, and because the editors and reporters for these publications now read blogs like Natural~Specialty Foods Memo and others regularly. We know this because we often get email communications from newspaper business section writers and others about stories we write about or news we break regarding the industry.

Business Week, arguably the mainstream media bible of business and industry in the United States, recently published a feature article on Sunflower Farmers Market and its founder Mike Gilliland--who by the way is no friend of John (Whole Foods' John Mackey that is). The two are the natural foods industry's version of the chemical reaction that results when you mix oil and water together if you've ever seen them in the same room together, even if that room is one of the two huge exhibit floors at the east or west coast Natural Foods Expo industry trade shows held annually.

We thought the Business Week article was pretty was well done and informative and therefore wanted to bring it to our readers in case you didn't see and read it in Business Week in late July. Plus, we are on vacation today--so we aren't writing an original piece or two like normal.

Sunflower Sprouts Fresh Stores and Consumers
Mike Gilliland, Wild Oats' founder, has big plans for his fast-growing Sunflower Farmers Market

by Jessie Scanlon

Page Morgan-Draper still shops at her local Albuquerque Whole Foods (WFMI). But, says the mother of two: "We're not made of money." That's one of the reasons she stops at a Sunflower Farmers Market on her way home from work three days a week. The fast-growing chain of grocery stores in five Western and Southwestern states specializes in produce, much of it organic, bought directly from farmers and sold at almost Wal-Mart (WMT) like prices—two pounds of organic broccoli for $3 and 99¢ for a pound of apples, to quote recent specials at Morgan-Draper's local store.

With its "Serious Food, Silly Prices" tag line, Sunflower targets consumers like Morgan-Draper who want to eat healthy, natural foods, but can't afford—or don't want to pay—gourmet prices. As Sunflower CEO and co-founder Mike Gilliland puts it: "We're a cost-conscious Whole Foods."

But Gilliland wants to do more than just pick off that high-end grocery's belt-tightening shoppers. His prices, and the weekly Sunflower sales advertised in the newspaper beside the local supermarket ads, are an attempt to lure consumers at the middle-to-low end of the market. The potential genius of Sunflower is its appeal to consumers at both ends of a market that's increasingly split between low-cost big-box stores and wholesale clubs on one end, and high-end retailers at the other.

Growing His Second Chain

It's an innovative strategy that's easier said than done. The relative newcomer is virtually surrounded by highly aggressive competitors, from Whole Foods to the increasingly organic Wal-Mart and its recent small-format spin-off, Wal-Mart Marketplace (NSFM Editor's note: it's Marketside not Marketplace), itself launched in response to British brand Tesco's U.S. effort, Fresh and Easy.

But higher food prices—up 5% nationally between April, 2007 and April, 2008, according to the most recent figures from the Bureau of Labor Statistics—could give Sunflower a boost, as even middle class consumers become more price-conscious. And Sunflower's emphasis on organic produce, much of it grown locally, should appeal to the consumers that spent a total of $1 billion at farmers markets in 2006. Buoyed by these trends—and by a $30 million investment by private equity firm PCG Capital Partners in December, 2007—Sunflower is in the midst of a rapid expansion, growing from its current 14 stores to some 21 locations by the end of 2008. Fifty stores are planned for five years from now.

Sunflower is almost a déjà vu for Gilliland, who founded Wild Oats with his wife, Libby Cook, in 1987. "Back then, most people couldn't spell 'tofu,'" says the natural-foods pioneer. Despite some missteps as a first-time entrepreneur, he built Wild Oats into a $2.2 billion company before stepping down as CEO in 2001. (The more successful Whole Foods bought Wild Oats in 2007 for $565 million.) He launched Sunflower in 2002.

Pricing, Pricing, Pricing

There's a reason Gilliland thinks Sunflower will do well against his longstanding rival. The company's farmers-market format is based on a California chain called Henry's Market, one of the many companies Gilliland had acquired when he was Wild Oats CEO. As his company and Whole Foods expanded, he increasingly found his stores under pressure. "A Whole Foods would open nearby and the typical Wild Oats would lose 30% to 40% of its business overnight," he says.

But stores based on the Henry's Market format competed well because they were less intimidating to the casual natural-foods shopper and appealed to the demographic that didn't want to pay for the glitz of a natural-foods superstore.

Pricing is key to Sunflower's strategy and its drive to undersell Wal-Mart. Gilliland claims that at least 80% of the store's produce beats the giant's prices. He and his team have been rethinking myriad aspects of their business, trying to "squeeze pennies out of everything," he says. Sunflower buys its produce by the truckload directly from farmers; local trucking is done by Sunflower staff, using company vehicles. Construction, too, is managed in-house by Gilliland's brother, who outsources some jobs to skilled workers. This allows Sunflower to build a new store for less than $2 million, or $70 a square foot, compared to the $150-per-square-foot industry average for a new supermarket.

In terms of design, the stores are no-frills. "They're nice stores, but not works of art," says Gilliland. "Whole Foods is like a museum!" Of course, it's "silly prices," not sleek design, that he's going for.

A natural surge?

At least in the short run, analysts aren't convinced that Sunflower's market-bridging strategy will succeed, especially when it comes to wooing low-end consumers. "Let's get real," says David Livingston of DJL Research. "[Sunflower] simply does not have the economies of scale in terms of labor, rent, and purchasing power [to beat Wal-Mart]." Apart from produce, Sunflower's prices are higher than the giant's, although they're competitive. While consumers who are tired of the big-box shopping experience may be willing to pay a bit more at a friendly, smaller-format store, it's far from certain they will.

Considering the other ends of the market, Paul Weitzel, a managing partner at Willard Bishop, says: "I don't think people who shop organic are as price sensitive as some." But with the economy tightening, more consumers are going to focus on value.

It's too early to call Sunflower a resounding success, but its strategy seems to be working. Same store year-over-year sales are up by double digits, according to Gilliland. Looking forward, the company will benefit from consumers' continued focus on fresh produce and on healthy foods. According to Progressive Grocer's 2008 Annual Report on the industry, retailers expect produce to be the most-shopped food category this year, followed by private-label products—double good news for Sunflower.

"We expect a surge over the next five years as naturals go from niche to mainstream," says Willard Bishop's Weitzel. "Sunflower will be well-positioned for that."

Jessie Scanlon is the senior writer for Innovation & Design on BusinessWeek.com.

Retail Memo: Soaring Gas Prices Leading to Increased Grocery Category sales At U.S. Convenience and Drug Stores; Good For Small-Format Grocers Too

Guest Retail Memo From the Washington Post

From Soda and Chips To Grocery Staples
Shoppers Turn to 7-Eleven, CVS to Beat High Gas Prices

By Ylan Q. Mui
Washington Post Staff Writer
Saturday, August 9, 2008

Walk into Zulfiqar Ali's 7-Eleven in Arlington and you'll find the standard stack of newspapers, rack of magazines and ATM in the front of the store. And, lately, two red grocery baskets.

Ali added them a few months ago after he noticed shoppers making multiple trips between the grocery shelves and the checkout counter, carrying cans of Goya black beans, Aunt Jemima pancake syrup and fresh fruit. On a recent evening, two elderly women who live nearby spent $150 on groceries. Ali has even expanded his stock of sugar, salt and cooking oil due to popular demand.

"It was not like that before," said Ali, who has worked at the store for six years and owned it for the past two. "Before, people just buy a couple of things and pay and leave."

Once primarily the province of Big Gulps and beef jerky, convenience and drug stores are siphoning away sales from traditional supermarkets as the weak economy and high gas prices force consumers to save more by driving less. They are stopping by not only for the quickie quart of milk, but also for pantry items normally bought at the supermarket -- and even for dinner. Some are using the stores to stretch their paychecks, buying what they need when they need it instead of stocking up.

At 7-Eleven stores in the Washington region, grocery sales were up 2 to 3 percent last month compared with last year, said Tom Gerrity, director for processed foods. Frozen food sales grew 7 percent, and ready-to-eat meals jumped 9 percent. Other regions across the country are seeing similar growth, with weekly spikes following paycheck cycles.

"Some of the products that would typically be purchased at a supermarket or club store in bulk quantities, we're seeing more customers buy those products throughout the month at a 7-Eleven," he said.

According to local trade publication Food World, 7-Eleven is among the top 10 grocery destinations in the Washington area, ranking ninth with annual sales of $469 million and 3.3 percent market share -- ahead of chains such as Harris Teeter (10th) and Whole Foods (11th). CVS ranked fourth with $941 million in sales, excluding prescriptions, and 6.5 percent of the market. Giant dominates the region with $3.3 billion in sales and 23.2 percent market share. Safeway follows with $2.6 billion in sales and 18.3 percent of the market.

Part of the strong rankings are due to the sheer number of convenience and drug stores in the region: 7-Eleven has 416 and CVS has 190. Whole Foods and Harris Teeter together have just 32 stores. But as gas prices continue to nibble away at consumers' wallets, many are finding that they can get what they need closer to home.

"It's a big number because convenience stores are everywhere," said Jeff Metzger, publisher of Food World. "They're trying to use the edge that they inherently have."

Convenience and drug stores have been ratcheting up the competition with traditional grocers over the past three years with expanded food offerings, Metzger said. CVS does not break out sales numbers for grocery, but general merchandise accounts for 15 percent of revenue, according to the company's latest annual report. CVS spokesman Mike DeAngelis said the retailer does not position itself as a grocery destination but does tailor merchandise to neighborhoods.

"Where we see a need in a particular community, we make efforts to expand our selection of staple food items (bread, milk) as well as our convenience food assortments," he wrote in an e-mail.

At Ali's store, grocery sales are up 6 percent, while chips grew 16 percent and take-home cookies and crackers skyrocketed 39 percent. Budget beers rose 15 percent. Yesterday morning, one customer bought toilet paper, napkins, Ritz crackers and Sunkist soda. Two boys walked in for a gallon of milk.

Mustafa Abdellatif, 68, stopped by for the newspaper and a Perrier mineral water. He lives nearby and shops at 7-Eleven when he doesn't feel like driving to the supermarket.

Lately, he has tried to cut back on his time behind the wheel because of gas prices. When he does drive, he said, he finds himself glancing at the fuel gauge more often. The 10-minute walk to the 7-Eleven qualifies as his exercise for the day.

"When I have a small list of groceries," he said, "then that's when I come here."

Food is an important profit-driver at convenience stores, particularly service items such as fountain drinks and on-the-go meals. Consulting firm Technomics estimates that profit margins on such items can easily hit 40 percent and may exceed 60 percent.

"A trip to the gas station may be unavoidable, but now consumers are more likely to also pick up a quick meal or a snack at a [convenience store] and avoid another stop," he said.

Pennsylvania-based Wawa, which has 30 locations in the area, recently began offering a six-item dinner menu at its convenience stores for $3.99 each or three for $9.99. Lisa Wollan, head of consumer insights and brand strategy, said the program has been a success and helped showcase the brand as a one-stop shopping destination.

"We were trying to give our customers maximum value," she said.

Still, a recent report by consumer behavior research firm TNS Retail Forward showed that the primary reason shoppers visited convenience stores was to fill up their gas tanks. Grocery shopping ranked last. Among store merchandise, cigarettes and other tobacco products make up the bulk of sales, followed by bottled beverages and alcoholic drinks.

"It's important to add destination appeal so that shoppers think of them not only as convenience," said Jennifer Halterman, Retail Forward senior consultant. "Adding that second layer can help them in the future."